Earnings management of initial public offering firms: evidence from regulation changes in China |
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Authors: | Jianlei Liu Konari Uchida Ruidong Gao |
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Institution: | 1. Graduate School of Economics Kyushu University, , Fukuoka, Japan;2. Faculty of Economics Kyushu University, , Fukuoka, Japan;3. Graduate School of Economics, Waseda University, , Tokyo, Japan |
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Abstract: | Discretionary current accruals of Chinese initial public offering (IPO) firms decreased after the abolition of fixed‐price offering systems that directly linked offering price to reported earnings. Results suggest IPO firms that decrease managerial ownership manage earnings upward during the fixed‐price offering period, but this relationship disappeared after the introduction of a book‐building system. We also find that bank debt is negatively related to discretionary current accruals during the fixed‐price offering period, but no relation exists for the book‐building period. Leverage has a significant positive relationship with earnings management. However, this finding is potentially attributable to nonoffering price objectives or endogeneity biases. |
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Keywords: | Earnings management Initial public offerings process Fixed‐price offering system Bank loan China |
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